Global payroll outsourcing is an area of growing interest for multinational companies seeking to reduce costs and complexity. The document discusses ISG's proprietary methodology and filtering tool for evaluating countries for potential payroll outsourcing. The tool analyzes countries across two axes - payroll complexity and organization/leverage potential. It identifies countries that may be suitable for different payroll sourcing strategies. The document also notes challenges in defining accurate business cases for global payroll outsourcing.

1. Bringing Order to Global Payroll Chaos
Global Payroll Filtering Methodology & Tool
ISG Business Advisory Services
Julie Fernandez, Director
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2. Global Payroll Filtering Methodology and Tool
1.
Market Demand for Global Payroll
2.
Global Payroll Methodology and Filtering Tool
3.
Business Case Considerations
4.
Appendix
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3. Growing Interest in Multi-Country Payroll Outsourcing
ISG has seen a noticeable increase in interest for multi-country payroll outsourcing
in recent 2-3 years, but are we as an industry able to convert that interest into
successful “deals”?
Considerations in Pursuit of a Multi-Country Payroll Strategy
Benefits
Challenges
► Reduce # of payroll providers for better
procurement pricing and contract terms
► Securing country-level buy in, participation,
and funding
► Consolidate interfaces to HR / GL
► Right-size outsourced scope
► Improve visibility and reporting of employee
headcount and cost
► Requires transition where payroll may
currently be stable
► Reduce compliance and financial risk
► Establish an ongoing governance model
► Harmonize payroll processes and improve
governance
► Cost allocations and charge backs to
individual countries vs. central budgets
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4. Many Dimensions of a Global Payroll Strategy
Pursuit of a global payroll strategy does NOT imply all countries must fit one model
and one provider
► Payroll frequently serves as the most updated employee record in countries without an
HRIS system or without integration to a global HRIS
► Regions direct efforts to develop shared services support and an integrated user
experience for HR and other G&A activities
 Balance local language and regulatory knowledge with leveraged sourcing
► A primary objective for many companies exploring multi-country payroll solutions is to
articulate guiding principles for the region or globe, based on
 Client’s own current state, footprint, key payroll systems and providers
 Right-sized payroll scope
 Payroll provider capabilities and footprint
 Planned and articulated business case driving what is actionable
► Iterative strategy design is used to engage regional and local teams to build buy-in,
secure funding and establish governance
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5. Key Dimensions of a Global Payroll Strategy
Pursuit of a global payroll strategy does NOT imply all countries must fit one model
and one provider
Right-Sized Payroll Scope
For large global clients, there is no “one size fits all”
when it comes to multi-country payroll outsourcing
► Large countries are actively exploring more robust
payroll solutions, adding scope and increasing
countries serviced
► Traditional processing model (G2N, pay slips, tax filing)
is still the predominant approach for most countries.
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Global Payroll Filtering
Payroll strategy is viewed through many lenses in
iterative design of global and regional sourcing mix
► Using its proprietary filtering tool, ISG applies a
structured methodology for determining
► Extensive data collection to payroll departments
around the world is not necessary in order to begin
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6. Key Dimensions of a Global Payroll Strategy (continued)
Companies exploring multi-country payroll solutions must first articulate guiding
principles for the region or globe and determine what is actionable, then source.
Service Provider Landscape
Mark-to-Market® Fee Ranges
Truly understanding who does what for whom is a
difficult picture to construct, as truly “it depends”
► Global heritage providers expand services and
geographic footprint across regions for a broad offering
► Replace client reliance on broad RFIs - a flawed means
to “fish” for a world of pricing or build a business case
► Niche payroll aggregator model specializes in services
to small employee populations spread across many
countries, targeting value to a client’s “tail” countries
► Go-to-market knowing what you want, for whom, and
from what providers instead of broad requests for
capabilities and geographic footprint
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7. Payroll Provider Capabilities and Footprint
Truly understanding who does what for whom is a difficult picture to construct, as
truly “it depends”
► Global heritage payroll providers are expanding services and geographic footprint
 Experience, platforms, and integration across countries and regions is maturing
 All have embedded “aggregator” models within their product mix for small countries
► Regional payroll providers are frequently identified as part of existing vendor landscape
 Generally serve a handful of co-located countries
 Cooperation and alliances among regional providers seen for responding to broader
RFPs
► Niche payroll aggregator model specializes in services to small employee populations
spread across many countries, targeting value to a client’s “tail” countries
 Generally manage payroll processing with in-country partners that comply with their
model to ensure aggregate payroll data and reporting
 Payroll services are right-sized to suit small country needs
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8. Business Case Challenges
Defining cost to your current payroll administration and the possible future
outsourced scenarios, has been an elusive and exhaustive effort for many clients
► Clients and providers alike continue to resort to RFIs as a very flawed means of “fishing” for a
world of global pricing
 Payroll scope and delivery requirements are not adequately defined in an RFI
 Providers offer a range of capabilities, which are described
 RFI fee estimates for a global laundry list of countries are of little value without more
definition
► Market pricing for payroll services in bundled deals has been seen to fluctuate widely as
clients show interest in bundled services, but explore pricing without actionable scope
► Go-to-market knowing what you want, for whom, and from what providers instead of broad
requests for capabilities and geographic footprint
► Some insight both current payroll cost and estimated outsourcing cost is needed to identify
sourcing opportunities that are actionable
 ISG clients use Mark-to-Market® data to estimate provider fee ranges in a given region and
for various degrees of payroll outsourcing
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9. Appendix
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10. Payroll Outsourcing Solutions
Right sized payroll means there is no broad “one size fits all” when it comes to
broad payroll outsourcing
HR Shared Services or Outsourcing
Workforce
Administration
Payroll Outsourcing Solution Evolved
 Tier I Contact Center Support
Compensation
Talent
Management
Benefits
End-To-End Payroll
Recruiting
Learning
Fully Managed Payroll Services
 System Maintenance / Configuration
 Data Management (Build-to-Gross)
 Total Interface / Upload Management
 Retro Adjustments, Overpayments, Reversals
 Pay Calculations & Reporting
 Employee / Manager Self-Service
 Payroll Accruals and Accounting
 Managing Payroll Compliance
Traditional Processing (Gross-to-Net)
 Payroll Software (Hosted)
 Regulatory / Tax Table Updates
 Gross-to-Net Calculations
 Special Payments / Off-Cycles
 Bonus Payment Processing
 Checks, Advices, Online Payslips
 Post-Payroll Interfaces and
Reports (Bank, GL, 3rd Party)
 Tier II Payroll Inquiries
Service Bureau or Stand-Alone Payroll
 On-Demand or Local Payroll System  Garnishments & Liens
 Tax Reporting & Remittance
 Banking Services
 Year End Tax Filings
 Employee Reimbursements
 WOTC Credits (U.S.) / Lodgments (APAC)
Timekeeping & General Ledger
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11. COMPANY XYZ – Global Payroll Filtering Results
Sample payroll filtering results for Company XYZ countries
4
► Countries fall noticeably to the left
and right on the grid
Payroll Complexity
■
Brazil
Japan
Russia
2
Korea
Croatia
China
Morocco
South Africa
Poland
Philippines
volume/complexity to require careful
review of existing delivery
Germany
India
Czech
Republic
Argentina Hungary
Spain
Slovakia
Portugal
Thailand
► Small, outlying countries identified as
“opportunistic”

0
1
2
3
Aggregation is ideal for global
headcount & visibility

United Kingdom
0
Small scale and scope payroll
delivery to the left
► “Hybrid” countries have enough
Mexico
Sweden
1
US
Larger, fuller scope payroll
delivery to the right
■
France
3
Is there value to offset
the cost?
4
Organization & Leverage
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11

12. Payroll Services Complexity Axis
High
For each country, the client’s complexity of payroll delivery is reviewed and
assigned directional scores relative to TPI suggested criteria.
Low
Low
Payroll Complexity Factors
Hybrid Scope /
Multi-Country
Strategy
Traditional
Payroll / Regional
or Aggregate
Strategy
Payroll Complexity
Traditional
Payroll /
Best-in-Country
Strategy
Fully Managed
Scope /
Multi-Country
Strategy
Organization & Leverage
►Country Payroll Complexity
►Number of Payroll Cycles
►Special Payroll Processes
►Number of Tax Authorities
►Number of Banks
High
►% EFT
►Pay Rate Calculations
► Broader outsourced scope
► Multi-country ERP
► Aggregate data and
reporting
► Localized offerings
► Sourcing and automation
dependent on scale and
cost
Low Complexity Solution
High Complexity Solution
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►# of Pay Sources
►Number of Legal Entities
►Number of Labor Agreements
►Number of GL Systems
►Payroll Delivery Cost
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13. Organization and Leverage Axis
High
The client’s organization, including each country’s size and potential for leverage as
part of a broader payroll delivery strategy is scored.
Low
Organization & Leverage Factors
Hybrid Scope /
Multi-Country
Strategy
Traditional
Payroll / Regional
or Aggregate
Strategy
Payroll Complexity
Traditional
Payroll /
Best-in-Country
Strategy
Fully Managed
Scope /
Multi-Country
Strategy
►Total Number of Employees
►Centralized Decision-Making
►Distinct Business Units &
Harmonization
►Span of Centralized Administration
►Systems Leverage
Low
Organization & Leverage
High
►Aggregate Reporting
► Local control
► Traditional payroll scope
► Local cost & governance
structure
► Centralized control
► Broad scope
► Leveraged costs and
combined governance
Low Scale & Leverage Solution
High Scale & Leverage Solution
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►Vendor Leverage
►Inquiry Support Channels
►Country Readiness
►Global Payroll Value
►Payroll Market Maturity
13

14. Exceptional Filtering “Trump” Considerations
Additional factors are commonly considered that may influence or “trump” the
quadrant or the phasing of the solution
Exceptional Situations
Burning
Platform or
Vendor
► Payroll system is unsupported or out of compliance
Satisfaction
► Payroll delivery is fraught with inaccuracies or burdensome work-around processes to
fix quality
Financial /
Compliance
Risk
► Significant risk due to current practices or no visibility
Integration
Timing
► Scheduled timing of large scale HRIS implementation or upgrade
► Existing payroll contract near expiration
► Scheduled timing of legal entity integration resulting from corporate mergers or
divestitures
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15. Scoring by Country in the Filtering Tool
A four-point scale is assigned to each filtering criteria and used to score the data
you have or are willing to assemble
► For each country, ISG completes survey scores using volume data and other response
provided
► Project leadership provides insight to corporate finance and IT questions
Criteria
Number of Taxing
Authorities
Payroll Services Complexity
Score
Scoring Guidelines
Number of taxing authorities is greater than 25
3
Number of taxing authorities is between 12 and 25.
1
Number of plans is between 4 and 11
0
3
Number of taxing authorities is fewer than 3.
Three or more banks are used to fund payroll for employees in this
country.
Two (2) banks are used to fund payroll for employees in this country.
1
0
Number of Banks
4
Country
Score
A single bank is used to fund all payroll for employees in this country.
N/A
4
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16. Sample Company M2MSM Results: Europe
ISG Mark-to-Market provides a fee range for use in modeling the outsourced
payroll services (of varying scope) in the business case.
1
COMPANY XYZ Cost & Key Service Metrics
2
Key Comparisons
Record Counts
Metric
Client Data
11,523 Active Employees
Employees
11,523
Event Counts
Price Per Employee
$197.17
136,934
56
11+
22
16
17
Payroll Cycles/Year
Special Payroll Cycles/ Year
Labor Agreements
Legal Entities
Payroll Banks
Statutory/Tax Filings
Countries (Active Employees)
Country H (1,400)
Country A (3)
Country I (136)
Country B (3,742)
Country J (220)
Country C (2,640)
Country K (104)
Country D (800)
Country L (810)
Country E (1,311)
Country M (4)
Country F (150)
Country N (300)
Country G (3)
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3
Market Range
$157 - $232
Mark-to-Market ® Ranges
320
300
280
260
High
240
220
200
Market
180
Current 3rd Party
Cost
160
140
120
Company XYZ
Low
100
80
$ Per Employee Per Year
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